Declining Birthrates, Expanded Bureaucracy: Is U.S. Going European?

To President Barack Obama and many other Democrats, Europe continues to exercise something of a fatal attraction. The "European dream" embraced by these politicians -- as well as by many pundits, academics and policy analysts -- usually consists of an America governed by an expanded bureaucracy, connected by high-speed trains and following a tough green energy policy.

One hopes that the current crisis gripping the E.U. will give even the most devoted Europhiles pause about the wisdom of such mimicry. Yet the deadliest European disease the U.S. must avoid is that of persistent demographic decline.

The gravity of Europe's demographic situation became clear at a conference I attended in Singapore last year. Dieter Salomon, the green mayor of the environmentally correct Freiburg, Germany, was speaking about the future of cities. When asked what Germany's future would be like in 30 years, he answered, with a little smile, "There won't be a future."

Herr Mayor was not exaggerating. For decades, Europe has experienced some of the world's slowest population growth rates. Fertility rates have dropped well below replacement rates, and are roughly 50% lower than those in the U.S. Over time these demographic trends will have catastrophic economic consequences. By 2050, Europe, now home to 730 million people, will shrink by 75 million to 100 million and its workforce will be 25% smaller than in 2000.

The fiscal costs of this process are already evident. Countries like Spain, Italy and Greece, which rank among the most rapidly aging populations in the world, are teetering on the verge of bankruptcy. One reason has to do with the lack enough productive workers to pay for generous pensions and other welfare-state provisions.

Germany, the über-economy of the continent, has little hope of avoiding the demographic winter either. By 2030 Germany will have about 53 retirees for every 100 people in its workforce; by comparison the U.S. ratio will be closer to 30. As a result, Germany will face a giant debt crisis, as social costs for the aging eat away its currently frugal and productive economy. According to the American Enterprise Institute's Nick Eberstadt, by 2020 Germany debt service compared to GDP will rise to twice that currently suffered by Greece.

Europe, of course, is not alone in the hyper-aging phenomena. Japan, South Korea, Taiwan and Singapore face a similar scenario of rapid aging, a declining workforce and gradual depopulation.

In the past, it seemed likely America would be spared the worst of this mass aging. But there are worrisome signs that our demographic exceptionalism could be threatened. One cause for concern is rapid decline in immigration, both legal and illegal. Although few nativist firebrands have noticed, the number of unauthorized immigrants living in the U.S. has decreased by 1 million from 2007. Legal immigration is also down. Meanwhile, the number of Mexicans annually leaving Mexico for the U.S. declined from more than 1 million in 2006 to 404,000 in 2010 -- a 60% reduction.

More troubling still, fewer immigrants are becoming naturalized residents. In 2008, there were over 1 million naturalizations; last year there were barely 600,000, a remarkable 40% drop.

The drop-off includes most key sending countries, including Mexico, which accounts for 30% of all immigrants. Since 2008 naturalizations have dropped by 65% from North America, 24% from Asia and 28% for Europe. In fact the only place from which naturalizations are on the rise appears to be Africa, with an 18% increase.